UK construction output falls 2.8% in July

UK construction output fell by 2.8% in July from June according to new figures by the Office for National Statistics (ONS). The new figures show that construction output is now 3.3% lower than at the same time a year ago.

Sharp falls were reported by the ONS in private industrial new work, which saw a drop of 13.4% year-on-year according to the three-month average for the months of May, June and July 2011 compared with the same months in 2010.

New public housing dropped by 15.8% in July compared to June and was 12% down compared to the same period in 2010. Private housing was down 4.9% in July compared to June, but up 4.1% year-on-year.

The decline in construction output was moderated by a 7.1% increase in new infrastructure work.

Steve McGuckin, UK Managing Director of the global construction consultancy Turner & Townsend, said: “Coming just a week after the underwhelming PMI construction figures there is little to cheer about in these ONS figures which show the volume of work down once again.

“Total output is barely better now than it was at the start of the year – any early hint of momentum appears to have been lost.

“The increase in infrastructure construction and drop in public sector housing construction had both been widely expected. But the drop in private industrial construction is worrying for the economy as a whole.”

The news of a contraction of the construction sector comes on the back of a gloomy economic predictions for the UK by the OECD - which warned that Britain’s economy could stagnate this year.

Dr Noble Francis, economics director at the Construction Products Association said: “Due to public sector spending cuts it is unsurprising to see that public housing output fell 12% in July compared to a year earlier and public non-housing, covering education and health, fell 9% in July compared to a year earlier.

“However, it is extremely concerning to see the key commercial sector (the largest construction sector) falling 4.1% in July compared to a year earlier and industrial factories and warehouses construction fell 20% in July compared to a year earlier, reflecting the economic uncertainty.

“Given that construction is around 10% of GDP and economic forecasts continue to be revised down, this does not bode well for the economy in Q3.”

The ONS however revised its figures for growth in the sector between Q1 of 2011 and Q2 from 0.5% to 1.1%, due to the receipt of additional data by businesses.